Spain swallows a beautiful lie

I know I have been covering Europe for over 18 months but sometime things just confuse me:

Crowds of Popular Party supporters have celebrated outside the conservative party’s headquarters in Madrid after it won an absolute majority in parliament in Spain’s general election.

About 1000 people cheered and waved blue and white party flags on Sunday when Popular Party leader Mariano Rajoy, 56, appeared on a large balcony set up outside the headquarters accompanied by his wife Elvira and several top party officials.

‘Thanks to you and my party today we are here and we can say we have a very significant majority,’ he said to applause and cheers from his supporters.

With more than 99 per cent of the ballots counted, the Popular Party had 44.6 per cent of the vote and an absolute majority of 186 seats in the 350-member Congress of Deputies, its biggest election win ever.

The win gives Rajoy a free hand to ram through severe austerity measures in the eurozone’s fourth biggest economy.

The Socialists, in power since 2004, won 28.73 per cent of the vote, giving them 110 seats.

Voters were angry over a 21.5 per cent jobless rate, a stalled economy, government spending cuts and a worsening debt crisis.

‘I am very happy, we could not remain on the same path. I am really happy that they won an absolute majority. This way it will be easier for them to adopt the measures that Spain needs,’ said Ana Perez, a 46-year-old shopkeeper.

Mariano Rajoy, the new leader, was deliberately vague about his economic plans during the election campaign so that he didn’t frighten off voters. He simply stood back and let the incumbents fry themselves.

So what exactly is this revolutionary new plan that has sent the people into the street in a jubilant furore.?

Umm…

Miguel Arias, the Popular Party’s campaign co-ordinator, said Spain was “going to make all the sacrifices”.

“We have been living as a very rich country, People are used to a very high level of public services and it takes time to them to acknowledge the realisation that we now are a poor country, that we have lots of debts and in order to pay them back we must reduce public expenditure and then we must recover the confidence of the markets.”

So some more austerity then.

Is it just me, or has the Spanish public just been sold a beautiful lie ?

Comments

  1. I am often confused because the same thing happened in Greece and Italy. People were happy that their previous leaders were ousted, even though their replacements are open about inflicting even more pain onto them.

    I think the trouble is that they are still believing that (under ideal conditions) a decade of austerity-induced pain before the ultimate difficult, is preferable to a default now. They are being sold the false hope that Europe can return to pre-crisis debt-driven growth amidst a credit-hangover and increasing austerity. Many still want to remain in the Euro!

    I’m sure they’ll be angry soon enough in Spain. After living it rich with 10-20% unemployment and imaginary wealth from their property bubble, they will surely enjoy additional austerity…

    • The angrier the people; the more the civil unrest, the more the pressure is put on Germany, to relent and pay-up? I suspect that Germany will eventually leave them all to it…..

      • “I suspect that Germany will eventually leave them all to it”

        Or Germany is waiting for an opportune moment to say “look we unified with the East which was also a financial basket case. No-one there regrets that decision. We are now offering you that same opportuninty to prosper. Join us”

        Call it the Anaken Skywalker option.

        • darklydrawlMEMBER

          hehehe “Anaken Skywalker option”. Now that is a term that should be adopted 🙂 Excellent stuff.

    • What people living in country with fake democracy with two-party system can do?

      Their choice is between party that destroyed them and party that will destroy them.

      • Yes I sometimes worry about the bi-polar nature of democracy.

        For example here in OZ we have the “Stupid” Party and the “Evil” Party.

        Choose wisely, because you MUST choose.

        • Well, with an opposition leader like Abbott, you don’t need to try hard to be the rational best choice. It’s a disgrace that it should be this way. In luxury car markets, the top brands are often quite similar in quality and features. Why is it that in politics you don’t even get a luxury choice?

          Alas, true political reforms will never occur.

        • darklydrawlMEMBER

          Yeah, somedays I wish that not choosing at all was a valid legal choice too.

          Actually I would like to seev an election result where no-one gets voted in. Or the ‘Null’ candidate gets the most votes. Damn, there should be a NULL option!

          “We don’t like any of you – send us some new folks and we’ll reconsider”…. 🙂 Frankly that is how I am feeling about the next Federal election. I am not even religious, but God help us all… What a pack useless [email protected] For once I want to hear one of them say what is good for the country, rather than what is good for the party.

      • Agree with the sentiment. I’m not a fan of bi-party systems either, so many countries that employ those systems seem to be dealing with a dysfunctional political discourse.

        I’m a huge fan of proportional voting (electorate/seats = votes needed to get into parliament). There are some significant disadvantages such as the time needed to form a coalition, but having experienced the drama in Oz I can only say that the disadvantage is nothing compared to the horrible adversarial culture bi-party systems seem to foster…

        @Prince, yes, democracy is bi-polar, but with proportional voting at least it’s a scale between two extremes and not the binary stuff we experience here.

        • I don’t think we live in a democracy. We live in a politocracy, government of the people by the politicians for the political parties.

          Once every three years the pollies think about the ‘punters’ as they like to refer to us.

    • Many still want to remain in the Euro!

      That shouldn’t be surprising. The alternative is akin to chaos, and a likely immediate increase in prices of Eurozone-sourced products. (of course, memory is short and many don’t recall previous revaluations against external currencies.)

    • dumb_non_economist

      It’s simple revenge. They may accept austerity measures from the opposition, but they’ll be damned if they’ll accept them from the pollies who put them there in the first place.

      • The Popular Party were responsible for firing up the humungous property bubble that landed Spain in so much trouble. The Socialists were unlucky enough to win an election on the eve of the GFC and have been trying to hold the place together.

        Now the Popular Party are going to try cutting the public sector at a time when their banking system is basically broke, the private sector has been through 4 years of recession and all of Spain’s trading partners are either close to or already in recession.

        It is not looking good for Spain.

        • dumb_non_economist

          My comment was just a general one, not Spain specific. So, that doesn’t make sense for them to do that!

    • Dam I thought you were talking about Australia. The only difference I see here is that while Labour and Gillard are on the nose, Abbott’s personnel rating is no better than Gaillards. It’s only the Libs as a party that are winning at the moment. God help Australia if Abbott does get in. One can only hope the wiser heads in the Liberal Party get a better, more competent and trustworthy leader than the goose we have at the moment. Abbotts Liberals will be a dreadful alternate to the clowns we have the moment.

  2. So it’s all that easy…a simple default and it’s off to the races again living the high life, living beyond our means and incurring more debt? No need to restructure, no need to cut wasteful public spending including out of kilter salaries, import more than we produce, support houses no one can afford etc etc etc?

    It’s not a simple choice of a default now or a decade of austerity induced pain!! As jeimech called it ‘an ugly truth’ is all there is

    • hear hear…

      I do not believe austerity will get Europe out of this mess but I do believe in the reform-focused aspect of the measures. I believe reform is a requirement for successful and sustainable growth through economic stimulation.

      I think the result in Spain shows that people do not always vote simply out of limited, short-term self-interest but are willing to take a hit to get there later on. (I’ll leave out any opinion on whether it is misguided or not).

    • Both choice are painful, but since once is less so then yes it is a simple default.

      It would of course require austerity as well, but the country would be able to recover without the burden of interest payments.

      The alternative is slowly approach default while wasting more and more money on interest payments. Then eventually the ECB will be forced to print and the country can enjoy lower interest rates, but much higher real ones. There will be no mood for austerity when living costs are rising and so we can look forward to an even bigger crisis…

      These debts cannot be paid back. The fantasy of growing out of a crippling debt/GDP ratio is just that.

      I will say this though, unless the world learns that deposit/lending and investment banks should be kept separate, that LVRs should be kept at a max of 70-80% and no growth can be pursued using ponzi strategies of population or credit growth (tip, use GDP per capita) then I don’t care which way this plays out as the world will get exactly what it wants, with all the trimmings. The fact people still look to housing price or credit demand increases for a way out of this mess, means they do not deserve anything other than prolonged reccesion/depression.

  3. And here I was thinking competing against countries with wages a tenth or less of the developed world was good for the majority of the western populace. Do you ever think you’ve been lied to?

    • The Washington Consensus, Neo-liberalism
      and the credit driven solution to the 1970’s failure have done wonders for the winners for decades. These were not lies.
      Just stupid ideas that worked well for the owners of the world.

      It’s those who have to pick up the pieces and move on that I care about.

      Austerity measures in all cases now will only increase the nasty effects of this credit crunch of epic proportions.
      Those prescribing these measures are those who wont feel the pain when these measures bite.

      And it’s as if all we need is some serious men in suits sorting out the profligate or spendthrift PIIGS to make the world safe for capital again.
      If only that were the case…

      It’s time to reap the wealth of the middle classes. These reapers? Who did Monti work for again? and the new guy appointed to the job in Greece? He worked for – oh, Goldman Sachs. And was associated with the Trilateral Commision. Just like Monti.

      It’s a club, and we ain’t in it.

  4. “These debts cannot be paid back. The fantasy of growing out of a crippling debt/GDP ratio is just that.”

    The debts can be repaid, but only if:

    – the interest rate that applies is low and stable
    – economic growth is higher than the interest rate
    – the economies can go through a price adjustment
    – fiscal balance can be achieved and maintained

    It is just going to be very difficult to achieve these things when the general environment is deflationary. There needs to be a system-wide approach to this.

  5. StanGoodvibesMEMBER

    Maybe they are all just excited to still be in a democratic country that actually *had* an election, instead of a FED\EU\ex-vampire-squid Overlord a la Greece, Italy, and whoever next falls foul of Germany.

    A week or so ago I said that in a crisis Germany normally annexes a country, usually Poland.

    I wasn’t far wrong – using the ECB to manipulate the bond market to force out the incumbent elected Prime Minister, and replacing him with a Bundesbank puppet has got to be the 21st century equivalent of lining troops up along the border and shooting them.

    (please play “The Final Countdown” by the aptly named band “Europe” in the background whilst reading my post, for full effect)

  6. Politocracy is the word,thanks Anton, and can you imagine our country with someone like Abbott at the helm? Based upon his record, or lack of it, we would become the laughing stock on this planet…